A growing proportion of consumer transactions now utilize electronic payment modalities rather than cash. Completion of a transaction typically requires the physical presence of the consumer, who may be asked to authenticate himself, present a physical token and/or provide a signature to a merchant or bank. Credit cards (which represent a type of physical token) have been accepted and validated electronically for many years. Many merchants now have readers for credit and debit cards at each point-of-sale (POS) terminal, so that customers can swipe their own cards and complete transactions. The reader acquires the information encoded on the magnetic strip of the card and transmits this to a payment processor, which upon approval of the card returns an authorization code that enables the merchant to complete the transaction. This information exchange generally occurs over standard telecommunication infrastructures.
Widespread usage of computationally advanced mobile telecommunication devices increases the range of modalities available for completing electronic transactions. A mobile phone, for example, may utilize its own ability to communicate securely via the telecommunications infrastructure with a payment processor so as to obviate the need for remote communication by a POS reader. In these arrangements the customer, rather than the merchant, communicates with the payment processor, which approves the transaction by sending an electronic message to the phone. The phone, in turn, uses the message to generate a token that may be read by the merchant's POS system—either optically (e.g., as a QR code) or as a wireless signal (e.g., by means of near-field communication or NFC). A form of public-key encryption may be used so that the merchant's reader need not itself communicate with a remote system; its ability to successfully decrypt the token it has read suffices to validate the transaction. This form of electronic payment is sometimes called “m-payment” (connoting a “mobile payment” using a mobile communication device). In other m-payment schemes, the mobile phone generates a token identifying the user and specifying a payment processor, and the POS scanner communicates with the specified payment processor as it would for a credit or debit card.
Thus, the merchant may have a swipe reader for reading credit and debit cards and a separate scanner for NFC or optical tokens supporting m-payments. Acclimating both merchants and customers these different types of payment systems, and supporting them with appropriate readers, will require continued investment. The experience of swiping a card, for example, can differ from transacting an m-payment. A credit-card customer instantly knows when her swiped credit card has been read, but an m-payment customer may hold his phone near the POS scanner not knowing when the token will arrive, whether the scanner has sensed it, and when it has approved the transaction. Improving the interactivity of the m-payment transaction experience will accelerate mainstream acceptance of these new modes of payment.